chfa seller s guide september 2017 financing the places where people live and work 09/17.v8

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1 chfa seller s guide september 2017 financing the places where people live and work 09/17.v8

2 chfa seller s guide table of contents Chapter 1: Lender Participation Section 100: Nondiscrimination and Fair Housing 1 Section 101: Participating Lender Qualifications 1 Section 102: Participating Lender Approval Process 3 Section 103: Maintaining Participating Lender Approval 3 Section 104: Suspending or Terminating Participating Lender Approval 4 Section 105: Participating Lender s Representations And Warranties 4 Section 106: Delivery of a Mortgage Loan 6 Section 107: Participating Lender Allowable Fees and Charges 10 Section 108: Recapture Tax 11 Section 109: Privacy and Confidentiality 11 Section 110: Equal Opportunity Lending 12 Section 111: Borrower Communication 12 Section 112: Cobranding 12 Section 113: Third-party Originators 13 Chapter 2: Eligibility Requirements Section 200: General Eligibility Requirements 14 Section 201: Borrower Eligibility 14 Section 202: Property Eligibility 17 section 203: property eligibility - attached projects Chapter 3: Programs Section 300: General Information 21 Section 301: Eligible Mortgage Loan Types 21 Section 302: Special Financing Enhancements 23 Section 303: Pool Insurance 24 Section 304: CHFA Down Payment Assistance Options 24 Section 305: CHFA Advantage 27 Section 306: CHFA Preferred and CHFA Preferred Plu s s sm 30 Section 307: CHFA Firststep sm and CHFA Firststep Plus sm 34 Section 308: CHFA Smartstep sm sm and CHFA Smartstep Plus 35 Section 309: CHFA Homeopener sm sm and CHFA Homeopener Plus 35 Section 310: CHFA FHA Streamline Refinance Program 36 Section 311: CHFA Homeaccess sm and CHFA Homeaccess Plus sm 37 Section 312: CHFA Sectioneight sm Homeownership and CHFA Sectioneight sm 39 Homeownership Plus chapter 4: Reservation 42 Section 400: General Reservation Information 42 Section 401: Interest Rates 42 Section 402: Making a Reservation 42 ii

3 Section 403: Reservation Acceptance 43 Section 404: Reservation Period and Reservation Expiration 44 Section 405: Extensions, Fees, and Penalties 44 Section 406: Rate Adjustment Fee 45 Section 407: Reservation Changes and Transfers 45 Section 408: Cancelled or Expired Reservations 46 Chapter 5: Program Compliance Review Procedures Section 500: CHFA Program Compliance Review 47 Section 501: Borrower Income and Gross Annual Household Income 48 Section 502: Program-specific Compliance Review Requirements 52 Chapter 6: Loan Purchase Procedures Section 600: General Information 55 Section 601: CHFA First Mortgage Loan Requirements 55 Section 602: CHFA Refinance Programs 59 Section 603: CHFA DPA Grants 60 Section 604: CHFA DPA Second Mortgage Loan 60 Section 605: CHFA Homeaccess Second Mortgage Loan 61 Section 606: Title Insurance Requirements 62 Section 607: Hazard and Flood Insurance Requirements 65 Section 608: Mortgage Loan Purchase Dates 66 Section 609: Funding 66 Section 610: Purchase Reconciliations 70 Section 611: Purchase Delivery Procedures 70 Section 612: Purchase Review 73 Section 613: Obligation to Repurchase 74 Section 614: Repurchase and Assignment of Servicing for CHFA Homeaccess and CHFA Sectioneight Homeownership Mortgage Loans 76 Section 615: Early Payoffs 76 Chapter 7: Final Document Procedures Section 700: Final Document Delivery 77 Chapter 8: Servicing Section 800: Purchase of Mortgage Loan and the Servicing Transfer Deadline 79 Section 801: Servicing Requirements 81 Section 802: Mortgage Insurance Premiums 81 Section 803: Transfer of Mortgage Insurance/Guaranty, Hazard, and Flood Insurance 82 Section 804: Payment of Property Taxes 82 Chapter 9: Mortgage Credit Certificates Section 900: General Information 83 Section 901: MCC Lender Criteria 83 Section 902: Availability of Funds 86 Section 903: Set-Aasides 86 Section 904: MCC Reservations 87 Section 905: Program Requirements 88 Section 906: Qualifying With a Mortgage Credit Certificate 93 Section 907: Program Eligibility Review 93 iii

4 Section 908: Closing of the Loan 94 Section 909: Final Certificate 95 Section 910: Final Certificate Reporting and Follow Up 95 Section 911: Reissued Mortgage Credit Certificate 96 Section 912: MCC Credit Calculation Worksheet 98 Chapter 10: Recapture Tax Provision Section 1000: Mortgage Loans Subject to Recapture Tax Provision 99 Section 1001: Borrower Notification 99 Section 1002: Recapture Tax Provision Requirements 99 Chapter 11: Targeted Areas Section 1100: General Information 101 Section 1101: Entire Counties 101 Section 1102: Adams County Targeted Areas 102 Section 1103: Arapahoe County Targeted Areas And Descriptions 102 Section 1104: Boulder County Targeted Areas 103 Section 1105: Denver City And County Targeted Areas 103 Section 1106: El Paso County Targeted Areas 104 Section 1107: Fremont County Targeted Areas 104 Section 1108: Jefferson County Targeted Areas 104 Section 1109: Lake County Targeted Areas 104 Section 1110: Larimer County Targeted Areas 104 Section 1111: Logan County Targeted Areas And Descriptions 105 Section 1112: Montrose County Targeted Areas And Descriptions 105 Section 1113: Morgan County Targeted Areas 105 Definitions A to Z Definitions 106 iv

5 chapter 1 lender participation section 100: nondiscrimination and fair housing A. CHFA s Nondiscrimination Policy With respect to its programs, services, activities, and employment practices, Colorado Housing and Finance Authority (CHFA) does not discriminate on the basis of race, color, religion, sex, age, national origin, disability, or any other protected classification under federal, state, or local law. Requests for reasonable accommodation, the provision of auxiliary aids, or any complaints alleging violation of this nondiscrimination policy should be directed to the Nondiscrimination Coordinator, , CHFA, 1981 Blake Street, Denver, CO , available weekdays 8:00am to 5:00pm. B. Fair Housing The Fair Housing Act, 42 U.S.C et seq., prohibits discrimination by direct providers of housing, such as landlords and real estate companies, as well as other entities, such as municipalities, banks or other lending institutions and homeowners insurance companies whose discriminatory practices make housing unavailable to persons because of: race or color, religion, sex, national origin, familial status, or disability. section 101: participating lender qualifications A. General Qualifications To be approved by CHFA as a Participating Lender, a Lender must meet the following requirements: 1. Demonstrate a minimum tangible net worth of $1,000, Demonstrate minimum warehouse lines of credit of $3,000,000 and be in good standing with those warehouse providers, or have equivalent liquidity. 3. Have fidelity bond and mortgage errors and omissions coverage in an amount at least equal to $300, Have internal audit and management control systems in place to evaluate and monitor the overall quality of its loan production. 5. Have the financial ability to Repurchase any Mortgage Loans that fail to meet the performance and quality standards defined in this Guide, in accordance with the terms of the Mortgage Purchase Agreement. 6. Have the ability to service any Mortgage Loan until Loan Purchase by, and servicing transfer to, CHFA. 1

6 7. If a Participating Lender is a national banking association or a state or federal savings and loan association, then such Participating Lender must also maintain a (physical) Colorado office; including having staff that conduct business from that office. Home-based offices do not meet the CHFA criteria of a physical Colorado office. 8. Ensure that all staff (and any third-party contractors) are knowledgeable about the various aspects of mortgage loan origination, mortgage loan sales, and mortgage loan servicing, as is applicable to their position within the lender organization. 9. Use sound business judgment in all aspects of its operations. 10. Demonstrate a commitment to providing sound financing options to low- and moderateincome homebuyers in Colorado. 11. Use its best efforts to protect Applicants and Borrowers from fraud, misrepresentation, and/or negligence by and of its staff or third-party contractors involved in the origination process. 12. Have written business practices and procedures that are designed to avoid predatory lending practices, regardless of whether or not the Participating Lender utilizes an automated underwriting system, underwriting staff, or private mortgage insurance contract underwriters to perform credit underwriting functions. 13. Comply with all state and federal requirements for disclosure, licensing, education, identification verification, and other applicable requirements that are mandated for persons and entities which originate residential mortgage loans in the State. 14. Be a member of the Mortgage Electronic Registration Systems, Inc. (MERS) and/or be MERS-ready at the time of CHFA Participating Lender approval. B. Program Specific Qualifications If the Lender intends to originate, credit underwrite, and sell: 1. FHA-insured Mortgage Loans to CHFA, the Participating Lender must be an FHA-approved Direct Endorsement mortgagee. 2. VA-guaranteed Mortgage Loans to CHFA, the Participating Lender must be a VA-approved Automatic mortgagee. 3. RD-guaranteed Mortgage Loans to CHFA, the Participating Lender must be an RDapproved mortgagee. 4. Conventional Mortgage Loans to CHFA, the Participating Lender must have an experienced staff underwriter or employ a private mortgage insurance contract underwriter. Additionally, the Participating Lender must ensure Mortgage Loans meet Fannie Mae or Freddie Mac selling criteria, as applicable. For all Mortgage Loans, the Participating Lender must utilize the most current underwriting criteria applicable for the specific loan type it is originating for sale to CHFA. Loans originated under a joint venture arrangement must close in the name of the approved Participating Lender. 2

7 section 102: participating lender approval process A. To apply for approval as a Participating Lender for some or all of CHFA s Programs, a Lender must: 1. Complete a Participating Lender Pre-application Questionnaire to determine prequalification. The Questionnaire must be completed and submitted to CHFA for evaluation. Following review of the Pre-application Questionnaire by CHFA, a Participating Lender Application will be sent to those Lenders that prequalify. 2. Complete and submit a Participating Lender Application, with all required attachments and a $1,000 nonrefundable application fee. 3. Provide any additional documentation requested by CHFA. 4. Execute a Mortgage Purchase Agreement with CHFA and return it with the $500 new Lender set-up fee due upon approval. section 103: maintaining participating lender approval A. After gaining initial approval, in order to maintain its approval a Participating Lender must: 1. Comply with the terms and conditions of all agreements executed between the Participating Lender and CHFA, and this Guide; 2. Annually provide CHFA with the following, evidencing continued compliance with CHFA s Participating Lender Requirements (see Section 101 of this Guide): a. Participating Lender s audited financial statements for the prior fiscal year; b. Participating Lender s quality control policies and procedures which meet applicable investor/insurer/guarantor requirements; c. Updated Participating Lender Operational Contacts Form (Exhibit B to the Mortgage Purchase Agreement); d. Participating Lender s Fidelity Bond Policy and Errors and Omissions Policy; e. Participating Lender s Good Standing Certificate, issued by the Colorado Secretary of State dated effective as of or after the date of this Notice; f. Any additional documentation requested by CHFA; and g. A $500 annual renewal fee. 3. Participate in all training required for Participating Lenders and staff. 4. Provide immediate notice to CHFA if any regulatory agency assumes a participating role in the management of the Participating Lender s operations; 5. Provide immediate notice to CHFA if any regulatory agency suspends or withdraws the Participating Lender s approval to originate mortgages. 3

8 B. CHFA expects a Participating Lender to demonstrate its commitment to originate CHFA Program loans by: 1. Completing delivery for Purchase of at least one (1) First Mortgage Loan to CHFA within the first six (6) months after signing the Mortgage Purchase Agreement. 2. Completing company-wide delivery for Purchase of: At least 12 loans per year in the Metro Areas of the State; or At least four (4) loans per year in the Non-Metro Areas of the State. 3. Using best efforts to originate, and deliver for Purchase, Mortgage Loans in Targeted Areas. CHFA may revoke or terminate the Mortgage Purchase Agreement and revoke Participating Lender status for any Participating Lender that fails to deliver a Mortgage Loan for a six (6)-month period. section 104: suspending or terminating participating lender approval CHFA reserves the right to suspend, modify, or terminate approval if a Participating Lender fails to perform or provide information as required or requested in accordance with the Mortgage Purchase Agreement and/or this Guide. Without limiting any of CHFA s rights under the Mortgage Purchase Agreement, in the event that the Participating Lender has failed to observe or perform its obligations under the Mortgage Purchase Agreement and/or this Guide, CHFA may suspend the right of the Participating Lender to make a Reservation or sell Mortgage Loans to CHFA for a period of time to allow the Participating Lender to cure its deficiency. Such a suspension is strictly within the sole discretion of CHFA. section 105: participating lender s representations and warranties With respect to each Mortgage Loan sold to CHFA by a Participating Lender, the Participating Lender makes the following representations and warranties. These representations and warranties survive the Purchase of the Mortgage Loan and Servicing Rights, and are expressly relied upon by CHFA. A. The Mortgage Loan complies with all of the requirements, conditions, and procedures established by CHFA in the Mortgage Purchase Agreement, any Program Participation Agreements, and this Guide. B. The Participating Lender is the sole owner of the First Mortgage Loan, and all collateral securing the Mortgage Loan is free and clear of all claims, restrictions, liens, and encumbrances, except a first priority lien in favor of the Participating Lender, and the Participating Lender has the authority to sell the First Mortgage Loan, including all servicing rights, if applicable, on the terms and conditions set forth in the Mortgage Purchase Agreement. Upon Purchase, title to the Mortgage Loan shall pass to CHFA. 4

9 C. All documents, instruments, and agreements evidencing the Mortgage Loan, the collateral for the Mortgage Loan, and all guarantees of the Mortgage Loan are legal, valid, binding, and enforceable in accordance with their terms; have been properly executed, delivered, and, where necessary or advisable to protect or establish CHFA s rights in the Mortgage Loan or the collateral for the Mortgage Loan, filed, registered, and recorded, as applicable, in all appropriate public records. All mortgages, deeds of trust, security agreements, and other documents granting a security interest in collateral for the Mortgage Loan (Collateral Documents) create a valid, perfected, and enforceable lien on the Property. D. The full principal amount of the Mortgage Loan has been properly advanced to, or for the account of, the Borrower and the Unpaid Principal Balance and escrow deposit balances on the Mortgage Loan are correctly stated by the Participating Lender. All costs, fees, and expenses incurred in the making and closing of the Mortgage Loan and the recording costs, fees, and expenses for recording, filing, or registering all Collateral Documents have been fully paid. No lien of any Collateral Document and no interest in any Property under any Collateral Document has been released or subordinated, and no person or entity liable for all or any part of the indebtedness on the Mortgage Loan has been released for such liability by either express consent or the operation of law. No Mortgage Loan or any Collateral Document has been amended, modified, or changed in a manner not fully disclosed to CHFA in writing. The Mortgage Loan and the Collateral Documents for the Mortgage Loan are not in default. E. The Participating Lender has properly applied all funds received, from whatever source, intended to reduce or pay the Mortgage Loan or assist in the payment of the monthly payments with respect thereto for the purposes intended. F. The Mortgage Loan conforms, as applicable, to FHA, VA, RD, Fannie Mae, Freddie Mac, or Ginnie Mae requirements, rules, regulations, and guidelines. G. Except in the case of a conventional Mortgage Loan with a loan-to-value ratio of 80 percent or less, or a conventional Mortgage Loan originated for a CHFA Program not requiring Private Mortgage Insurance, each Collateral Document evidencing a security interest in real property shall be insured by the FHA, guaranteed by the USDA, or VA, or insured by an acceptable private mortgage insurer, whichever is applicable. H. The Mortgage Loan complies with all applicable laws. I. A mortgagee s title insurance policy with all endorsements deemed necessary or advisable by the institutional warrantor or guarantor s rules, regulations, or guidelines naming the Participating Lender, its successors and/or assigns, as the insured in the full amount of the Original Principal Balance on the First Mortgage Loan shall be in full force and effect when the First Mortgage Loan is sold to CHFA. J. The assignment of the First Mortgage Loan to CHFA shall be in proper form to be recorded and shall be registered in the name of Mortgage Electronic Registration Systems, Inc. (MERS). K. All signatures on the Mortgage Loan documents shall be genuine, and all Mortgage Loan documents shall be executed by persons duly authorized to execute them. CHFA only accepts electronic signatures for initial disclosures, initial loan applications, and purchase contracts, provided they are obtained in compliance with the E-Sign Act, the Uniform Electronic Transaction Act, and any other applicable requirements. L. The Participating Lender has complied with all federal and state laws and regulations with respect to the servicing of the Mortgage Loan prior to its transfer to CHFA. M. Upon the Purchase of a Mortgage Loan, CHFA shall have the right to service such Mortgage Loan and the right to receive all compensation payable with respect to such servicing, subject to the Mortgage Purchase Agreement. 5

10 N. On the date of Loan Purchase, in the judgment of the Participating Lender, the Mortgage Loan offered for sale to CHFA would in all respects be a prudent investment at the purchase price paid. O. The Participating Lender has not discriminated against any person or group of persons on the basis of race, color, religion, sex, age, national origin, disability, or any other protected classification under federal, state, or local law in making the Mortgage Loan. P. The Participating Lender certifies that the underlying transaction satisfies arm s length transaction requirements in accordance with applicable insurer/guarantor or Fannie Mae or Freddie Mac guidelines. Q. No fee, commission, kickback, or tangible or intangible compensation of any kind whatsoever shall be or shall have been received or retained by the Participating Lender, or to the Participating Lender s knowledge, realized by any other person or entity, except such fees as may be disclosed in the Settlement Statement for the Mortgage Loan. Any fees disclosed shall be in compliance with all state and federal laws. R. The Participating Lender has no knowledge of any circumstance or condition regarding the Mortgage Loan or the Borrower s credit standing that would cause prudent private investors in the secondary market to regard the Mortgage Loan as an unacceptable investment, cause the Mortgage Loan to become delinquent, or adversely affect the value or marketability of the Mortgage Loan. S. The Participating Lender has no knowledge of any fraud in relation to the Mortgage Loan. section 106: delivery of a mortgage loan The Participating Lender must review the Mortgage Loan application and the related Mortgage Loan and CHFA Program documents for each Borrower to determine whether the Borrower and the Property meet the eligibility criteria for the applicable CHFA Program. The Participating Lender is responsible for determining that a Borrower complies with all requirements of the Mortgage Loan insurer or guarantor, or of Fannie Mae or Freddie Mac, as applicable, for conventional Mortgage Loans, and for determining that a Borrower has the financial ability to repay the Mortgage Loan on the terms proposed. Such determination must be based on a thorough and objective evaluation of the Borrower s creditworthiness. Reasonable and appropriate measures must be undertaken by the Participating Lender to verify that all information provided is accurate and complete. CHFA will perform a Program Compliance Review of Mortgage Loans for Borrower and Property eligibility. CHFA may request additional documentation to support CHFA s review. Except for the CHFA HomeAccess sm and CHFA SectionEight sm Homeownership Programs, CHFA does not evaluate a Borrower s financial ability to repay, and the Participating Lender is responsible for such determination. Mortgage Loans must be submitted for Purchase within 10 days after the Closing Date. Prior to the delivery of a Mortgage Loan for Purchase, the Participating Lender shall verify the following: 6

11 A. Unpaid Principal Balance (UPB) The amount of the Unpaid Principal Balance of the Mortgage Loan and accrued interest, if any, due and owing from the Borrower. B. Deed of Trust and Promissory Note The Mortgage Loan is evidenced by a properly executed Promissory Note and First Deed of Trust and/or Second Deed of Trust, as applicable. The Mortgage Loan documents are the legal, valid, and binding obligations of the Borrowers, and are enforceable in accordance with their terms. All parties executing the Mortgage Loan documents had full legal capacity to execute such documents. The Participating Lender has not modified, satisfied, canceled, subordinated the Mortgage Loan indebtedness, or released the Property from the lien of the indebtedness. The terms of the Promissory Notes, First Deed of Trust and any Second Deed of Trust have not been materially waived, altered, or modified. C. Note Endorsement First Mortgage Loan Promissory Notes are made payable to the Participating Lender and, upon Loan Purchase by CHFA, endorsed by the Participating Lender: Pay to the order of Colorado Housing and Finance Authority, without recourse, with the name of the Participating Lender, the signature of the authorized officer, and the typed name and title of the signatory below the endorsement. The Note endorsement must not be dated. All Second Mortgage Loan Promissory Notes are payable to Colorado Housing and Finance Authority and do not require endorsement to CHFA. D. Title A Mortgagee s title insurance policy has been issued with respect to the First Mortgage Loan. The title insurance policy meets the requirements of Chapter 6, Purchase Procedures, of this Guide. The improvements on the Property securing the Mortgage Loan lie wholly within the boundaries and building restrictions of the Property, and no improvements on adjoining properties encroach upon the Property except as noted in the title insurance policy and permitted by Chapter 6, Purchase Procedures. There are no exceptions in the title insurance policy with respect to the survey, except for normal easements and restrictions that comply with the requirements in Chapter 6. E. Valid Lien The First Deed of Trust creates a valid and existing first lien to secure the First Mortgage Loan on the Property and any Second Deed of Trust creates a valid and existing second lien to secure the CHFA Second Mortgage Loan on the Property. The Property is located in the State and owned by the Borrower in fee simple together with the improvements and fixtures described. F. Liens and Encumbrances The Property has been completed and is free and clear of all mechanics liens that could materially adversely affect the value of the Property as security for the Mortgage Loan, and no rights are outstanding that could give rise to such liens. The Property is free from all other liens, encumbrances, restrictions, and covenants except those that comply with the requirements of 7

12 Chapter 6, Purchase Procedures, of this Guide. Upon receipt of notice, the Participating Lender will provide CHFA timely notice of any adverse actions affecting the Property, including but not limited to, the filing of any liens against the Property. G. Transfer of Mortgage Loan/MERS The First Mortgage Loan Deed of Trust shall be in proper form to be recorded and the Mortgage Loan shall be registered in the name of Mortgage Electronic Registration Systems, Inc. (MERS). CHFA will accept separate assignments only from Participating Lenders that are not MERS members. Assignments to MERS will be required prior to Purchase if the Participating Lender is not a MERS member. CHFA Form 230M, Assignment, is available at H. No Counterclaim, Offset, Defense, or Right of Rescission Neither the Borrower, nor any other individual, has the right to assert any counterclaim, offset, defense, or right of rescission against CHFA as assignee of the Mortgage Loan. I. Recording The First Deed of Trust and any Second Deed of Trust have been recorded by the Participating Lender in the proper public office in the proper order to give constructive notice thereof to all subsequent purchasers or third parties. J. State and Federal Laws and Regulations The Mortgage Loan complies with all applicable state and federal laws and regulations. The Participating Lender has not discriminated against any person or group of persons on account of race, color, religion, age, sex, national origin, disability or any other protected classification under federal, state, or local law in the origination of the Mortgage Loan. K. Unlawful Compensation To the best of the Participating Lender s knowledge and belief, no unlawful fee, commission, kickback, or other unlawful compensation or value of any kind has been or will be received, retained, or realized by any attorney, firm, or other person or entity, and no such unlawful items have been received, retained, or realized by the Participating Lender. L. Mortgage Loan Insurer or Guarantor Requirements 1. Each FHA-insured Mortgage Loan complies with the requirements of the National Housing Act, as amended, all rules and regulations issued thereunder, and all administrative publications. The FHA insurance is in full force and effect and will, upon Purchase of the Mortgage Loan, inure to the benefit of CHFA; 2. Each VA-guaranteed Mortgage Loan complies with the requirements of the Servicemen s Readjustment Act, as amended, all rules and regulations issued thereunder, and all administrative publications. The VA guaranty is in full force and effect and will, upon Purchase of the Mortgage Loan, inure to the benefit of CHFA; 3. Each RD Mortgage Loan complies with the requirements of the Housing Act of 1949, as amended, all rules and regulations issued thereunder, and all administrative publications. The RD guarantee is in full force and effect and will, upon Purchase of the Mortgage Loan, inure to the benefit of CHFA; 8

13 4. Each conventional Mortgage Loan complies with Fannie Mae or Freddie Mac requirements. 5. Each Mortgage Loan complies with the provisions of the policy of Pool Insurance, if applicable, and the Participating Lender has received a commitment to insure the Mortgage Loan under such policy. No pool insurance premium shall be paid from the proceeds of the Mortgage Loan. M. Borrower The Borrower is an eligible Borrower pursuant to Chapter 2, Eligibility Requirements, of this Guide. N. Advance and/or Use of Funds Based upon its review of (1) the application submitted in connection with the Mortgage Loan, together with all supporting documentation; (2) the purchase contract and all other contracts and side agreements relating to the purchase of the Property; and (3) the closing statement relating to the disposition of the proceeds of the Mortgage Loan, the Participating Lender has no reason to believe that: 1. Any proceeds of the Mortgage Loan are being used to pay any loan owed by the Borrower or member of his or her household other than a loan permitted by Chapter 3, Programs; 2. The allocation of closing costs between the Borrower and the Seller of the Property are inconsistent with the standard real estate practices in the community in which the Property is located; and 3. The Participating Lender has advanced money, or required any other party to advance money, to the Borrower to be used by the Borrower for the payment of any monthly installment of principal, interest, or other charges payable under the Mortgage Loan. O. Default and Delinquency There is no default or delinquency under the terms and covenants of the Mortgage Loan. CHFA will not purchase any Mortgage Loan that is delinquent or in default. P. Hazard and Flood Insurance The Property is covered by a valid and existing policy of hazard insurance (and flood insurance, if applicable), which meets the requirements of Chapter 6, Purchase Procedures. Q. Property The Property meets the requirements of Chapter 2, Eligibility Requirements. If the Property is New Construction, the Property has not been previously occupied. A model home is not New Construction. The Participating Lender has no knowledge that there are any violations of applicable zoning laws or regulations with respect to the Property To the best of the Participating Lender s knowledge, there is no pending proceeding for a total or partial condemnation of the Property, and the Property is undamaged by fire, windstorm, or other casualty. 9

14 The Participating Lender has no knowledge that either the Property or appurtenances thereto, or the intended use of the Property, is, or will be, in violation of any applicable law, rule, or regulation governing the protection of the environment. The Participating Lender has no knowledge of any pending case or proceeding directly involving the Property in which compliance with any such law, rule, or regulation is an issue. If the Property is located in a single-family attached project (i.e. condominium project or party wall project), the project meets CHFA criteria described in Chapter 2, Eligibility Requirements. R. Occupancy To the best of the Participating Lender s knowledge, the Property is, or within 60 days after the Mortgage Loan Closing Date will be, occupied by the Borrower as his or her Principal Residence. S. Underwriting Each Mortgage Loan was underwritten in accordance with all rules, regulations, and requirements of the applicable mortgage insurer or guarantor and/or of Fannie Mae or Freddie Mac for conventional Mortgage Loans. section 107: participating lender allowable fees and charges Unless otherwise stated in specific Program guidelines, the Participating Lender may not charge or collect any fees or points in excess of the fees listed below. Any fees for reimbursement of costs incurred are limited to the amount paid for the service. Discount points are prohibited. A. Allowable Fees 1. Origination Fee. The Participating Lender may charge an origination fee of 1 percent of the First Mortgage Loan amount. For FHA 203(k) Mortgage Loans, Participating Lenders may also collect a supplemental origination fee of 1.5 percent of the portion of the Mortgage Loan allocated to rehabilitation or $350, whichever is greater. 2. Other Lender Fees. The Participating Lender may charge reasonable and customary fees to the Borrower, provided the fees do not exceed the amounts charged in the area for similar non-chfa loans, and the fees must be directly related to actual services rendered for providing the loan, whether or not those fees are paid to a third party or collected by the Participating Lender for providing those services. In addition, the Participating Lender must adhere to applicable agency, insurer, and guarantor or Fannie Mae or Freddie Mac guidelines with respect to points and fees limitations. Total points and fees may not exceed the lower of: the allowable applicable agency, insurer, guarantor, or Fannie Mae or Freddie Mac guidelines, or 5 percent of the total loan amount. Loans with points and fees which do not meet the foregoing requirements will be subject to Repurchase by the Participating Lender day Upfront Loan Delivery Extension. If the loan is still within the original 60-day delivery period, the Participating Lender may request a one-time 30-day extension with the reserved Interest Rate for a fee of thirty-five one-hundredths of one percent/35 basis points (0.35%/35 basis points) of the OPB of the Loan. This fee may be paid by the Borrower, Participating Lender, or Seller of the Property, and will be deducted in the CHFA Purchase Advice. 10

15 4. Program-specific Fees. See applicable program directive or matrices for any additional Program specific allowable fees. a. For a CHFA DPA Second Mortgage Loan or a HomeAccess Second Mortgage Loan, Participating Lenders may collect the title company s closing fee and the recording fees for recording the Second Deed of Trust from the Borrower. No other fees may be charged. CHFA does not require the use of a title company to close a CHFA Second Mortgage Loan and does not mandate the collection of a closing fee. 5. Cash Back to Borrower(s) at Closing. CHFA will defer to insurer/guarantor or Fannie Mae or Freddie Mac guidelines with respect to whether the Borrower may receive cash back at Closing, and, if permitted, the amount. However, excess funds resulting from CHFA Down Payment Assistance Grants, CHFA Second Mortgages, or the Borrower Premium Option may not result in cash back to the borrower at closing. In any event, the Borrower must always meet the minimum Borrower contribution requirements for CHFA s Programs. 6. CHFA Program Fees. No fee shall be charged solely because the Mortgage Loan is originated under a CHFA program and/or is intended for sale to CHFA. No fee shall be designated as a CHFA fee. section 108: recapture tax Tax-exempt Program Loans may be subject to Recapture Tax Provisions, which were incorporated into the Internal Revenue Code (the Code) pursuant to the Technical and Miscellaneous Revenue Act of See Chapter 10, Recapture Tax Provision, of this Guide and the CHFA website at for an explanation. The Recapture Tax is initially disclosed to the Borrower in the Initial Applicant Affidavit. The original of this affidavit must be signed by the Borrower and included in the Program Compliance Review package for Tax Exempt Program loans. For Mortgage Loans subject to the Recapture Tax Provision, CHFA will provide a Notice of Potential Recapture Tax to the Borrower by either: Providing the Notice to the Participating Lender, and the Participating Lender will complete the form and provide it to the Borrower at the time of closing; or Providing the Notice to the Borrower within 90 days after Loan Closing. With the exception of stand-alone MCCs, CHFA will reimburse Borrowers for any Recapture Tax actually due and paid to the IRS, if the Recapture Tax is triggered by a payoff based on the sale of the Property. section 109: privacy and confidentiality A. Pursuant to the Mortgage Purchase Agreement, CHFA and Participating Lenders agree to comply with applicable consumer privacy laws (any and all federal, state, and local statutes, regulations, and rules applicable to the protection and privacy of consumer information, including but not limited to the privacy provisions of the Gramm-Leach-Bliley Act, 15 U.S.C Section 6801 et seq.), and to implement appropriate measures designed to safeguard customer information. 11

16 B. The Participating Lender will maintain the confidentiality of the information governed by consumer privacy laws. C. The confidentiality conditions in the Mortgage Purchase Agreement are material terms of the Agreement, and either CHFA or a Participating Lender may terminate the Mortgage Purchase Agreement, effective immediately, in the event of any breach of consumer privacy. D. CHFA has provided on its website a process, HomeConnection sm, whereby Participating Lenders may reserve Mortgage Loans and check the status of Mortgage Loans previously reserved. Participating Lenders must comply with the HomeConnection Terms and Conditions attached to the Mortgage Purchase Agreement. E. Participating Lenders are responsible for requesting from CHFA requisite access for their staff to HomeConnection, as necessary and appropriate, and Participating Lenders will take all necessary measures to manage access in a timely manner and to prevent unauthorized use. section 110: equal opportunity lending In originating a Mortgage Loan, the Participating Lender: A. Shall not discriminate against any person or group of persons on the basis of race, color, religion, sex, age, national origin, disability or any other protected classification under federal, state and local law. B. Shall make Mortgage Loans available in in accordance with all federal, state, and local laws and regulations. C. Shall comply with all requirements of Regulation B, including but not limited to the requirements for Applicant notifications. section 111: borrower communication CHFA works through and in cooperation with the Participating Lender. Until the Mortgage Loan is Purchased by CHFA, it is the responsibility of the Participating Lender to inform the Borrower or any other person(s) involved in the processing of the Mortgage Loan of CHFA guidelines and requirements. section 112: cobranding Participating Lenders are licensed to use the CHFA Participating Lender badge and product names within their marketing and advertising pieces. Such use must be in accordance with the CHFA Cobranding Guide, which is posted on the CHFA website, Participating Lenders are not licensed nor authorized to use the CHFA logo. Any questions regarding visual or language usage, or requests for a Participating Lender badge for use in advertising materials, may be directed to the CHFA Marketing and Community Relations Division at chfabrand@chfainfo.com. 12

17 section 113: third-party originators A Participating Lender may originate Mortgage Loans for sale to CHFA through a wholesale relationship with a third-party originator (TPO), provided such TPO is in compliance with all applicable state and federal requirements concerning licensing and regulation of TPOs. The Participating Lender is responsible for all required oversight of such TPOs. In addition, the Participating Lender must assure that all Mortgage Loans so originated are in full compliance with the Mortgage Purchase Agreement and this Guide, and remains fully responsible for any obligation thereunder relating to such Mortgage Loan including, but not limited to, any required repurchase of the Mortgage Loan(s). Lenders that intend to utilize TPOs in the origination of loans for sale to CHFA must notify CHFA of their intent to do so, and must originate such loans via a specifically designated branch established in CHFA s HomeConnection system. All loans originated using a TPO must close in the name of the CHFA Participating Lender. 13

18 chapter 2 eligibility requirements section 200: general eligibility requirements All CHFA Programs have basic eligibility requirements for both the Borrower and the Property. Participating Lenders should refer to Chapter 9, Mortgage Credit Certificates (MCC), for specific Borrower and Property eligibility requirements for the MCC Program. section 201: borrower eligibility A. Credit Requirements All Applicants must credit qualify for a Mortgage Loan in accordance with the applicable mortgage insurer/guarantor credit guidelines, or under Fannie Mae or Freddie Mac guidelines for conventional Mortgage Loans. Prior foreclosure on a CHFA Mortgage Loan does not necessarily preclude a Borrower from obtaining a new CHFA Mortgage Loan, provided the Borrower meets the applicable insurer, guarantor, or Fannie Mae or Freddie Mac requirements associated with the particular loan program utilized. CHFA is eligible for the Housing and Finance Authority (HFA) exemption to the CFPBs and other federal agencies Ability-to-Repay (ATR) and Qualified Mortgage (QM) Rules. Nonetheless, CHFA continues to expect Participating Lenders to conduct a thorough underwriting analysis and document the consumer s ability to repay the loan. Because loans financed or administered by HFAs are exempt from the ATR rule, HFA loans are also not subject to the QM standard, or the subset of safe harbor or higher-priced mortgage loan (HPML) QMs. Similarly, HFA loans are not subject to FHA s QM standard, or the subset of FHA safe harbor and rebuttable presumption QMs. Accordingly, CHFA will purchase loans that fall into the category of HPML or FHA rebuttable presumption QMs. Nonetheless, Participating Lenders must adhere to applicable investor, insurer, and guarantor guidelines with respect to points and fees limitations. As always, CHFA will not purchase any loans that meet any of the HOEPA coverage tests applicable to High-Cost Mortgages (12 CFR ). Further, total points and fees cannot exceed the lower of allowable investor/ insurer/guarantor guidelines or 5 percent of the total loan amount. CHFA may have additional Borrower credit requirements for any and/or all CHFA Mortgage Loan Programs. See applicable Program matrices, and Chapter 4, Reservation, of this Guide for specific guidelines. B. First-time Homebuyer Some CHFA Programs are limited to First-time Homebuyers. CHFA s First-time Homebuyer Programs may also be available to non First-time Homebuyers purchasing in a targeted area and Qualified Veterans. C. Borrower Residency Status All Mortgage Loans must be originated in compliance with the legal residency requirements of the applicable insurer or guarantor (FHA/VA/RD) or Fannie Mae or Freddie Mac. All Borrowers must have a valid Social Security number. 14

19 D. Occupancy All Borrowers must intend to, and must, occupy the Property as their Principal Residence within 60 days after the Closing Date. Except for short-term leasebacks which expire within 60 days after the Closing Date, the Borrower may not rent or lease the Property during the term of the Mortgage Loan without the prior written consent of CHFA. E. Income Limits Borrowers income must not exceed the applicable Income Limits associated with the particular CHFA program under which they are seeking a Mortgage Loan. F. Ownership of other Residential Real Estate Borrowers may have an ownership interest in one other residential property and still qualify for a CHFA Program loan, provided that such ownership is permissible under the requirements of the insurer or guarantor, or Fannie Mae or Freddie Mac, as applicable. The Property associated with the CHFA Loan must be owner-occupied and the Borrower s Principal Residence. 1. Examples of other residential property are: a. Cooperative b. Farmhouse c. Ranch home d. Manufactured Housing permanently affixed to a foundation with title purged e. Second home f. Vacation home g. Single-family investment property (one- to four-unit property) 2. The Borrower may own property not considered residential. Examples are: a. Commercial property b. Manufactured Housing not permanently affixed to a foundation c. Timeshare G. New Mortgage Loan The Mortgage Loan must be a new mortgage and not used to refinance or replace an existing mortgage, except as provided below. Refinance Loans are permitted for: 1. Repayment of a construction loan; 2. Repayment of a bridge loan, or other form of temporary financing with an initial term of 24 months or less; 3. Repayment of an existing FHA-insured CHFA First Mortgage Loan, in accordance with the requirements of the CHFA FHA Streamline Refinance Program. CHFA may subordinate an existing CHFA Second Mortgage Loan to the new Mortgage Loan pursuant to the terms and conditions of that Program and CHFA guidelines. 4. The CHFA Advantage sm Program Refinance Loan. 5. The CHFA Preferred sm Program Refinance Loan. 15

20 H. Homebuyer Education CHFA requires all Borrowers and Co-Borrowers, with the exception of permitted refinance loans, to individually complete an online or classroom-based CHFA-approved Homebuyer Education course, provided by a CHFA-approved provider, prior to closing. For purposes of CHFA Mortgage Loan programs, construction-to-permanent loan borrowers must complete homebuyer education. Note: Online Homebuyer Education may not be appropriate for all Borrowers. The Participating Lender may direct a Borrower to a classroom-based course rather than the online course for several reasons, such as Mortgage Insurance incentives or the Borrower s lack of comfort and familiarity with the Internet. Whether to complete Homebuyer Education online or in a classroom is ultimately the Borrower s decision. Reasonable accommodations are available at all CHFA-approved Homebuyer Education classes. In addition, specialized homeownership counseling for persons with disabilities is available. Homebuyer Education certificates are valid for 12 months. To meet the Homebuyer Education requirement, Borrowers must execute a purchase contract prior to expiration of the Homebuyer Education certificate. The most current list of CHFA-approved in-person and online providers and a schedule of classroom dates are available on the CHFA website at or by calling or I. Co-Borrowers CHFA permits Co-Borrowers if they: 1. Meet the CHFA eligibility requirements; 2. Take title to the Property; 3. Obligate themselves for the Mortgage Loan by signing the Promissory Note(s) and First Deed of Trust; and 4. Intend to occupy the Property as their Principal Residence. J. Cosigners CHFA does not permit Cosigners. K. Minimum Financial Investment 1. CHFA requires Borrowers to make a Minimum Financial Investment towards the purchase or refinance of the Property. The specific amount is specified in the applicable Program Matrix. 2. CHFA requires the Minimum Financial Investment to be from the Borrower s own funds. However, the Minimum Financial Investment can come from a gift, other than the CHFA DPA Grant or CHFA Second Mortgage Loan, if this is acceptable to the mortgage insurer or guarantor, or to Fannie Mae or Freddie Mac, as applicable, for conventional Mortgage Loans. The Minimum Financial Investment cannot come from the proceeds of any subordinate Mortgage Loan, or from any new debt acquired by the Borrower, including credit card debt. Funds that come from a gift must be documented according to the mortgage insurer or guarantor requirements, or according to applicable Fannie Mae or Freddie Mac requirements for conventional Mortgage Loans. 16

21 The following items, paid by the Borrower outside of closing, may be counted toward the Minimum Financial Investment if documented on the Closing Disclosure. a. Earnest money deposit; b. Application, appraisal, or credit report fee paid to the Participating Lender; c. Home inspection fee, including fees paid for additional inspection services, such as sewer scopes, or structural engineer s report; d. Hazard insurance premium paid outside of closing; e. Thirty-day Loan Delivery Extension Fee; f. For HUD Homes only, the closing agent s closing fee; and/or g. Any Homebuyer Education Fee for online Homebuyer Education. A real estate agent fee, if any, paid by the Borrower cannot be counted toward the Minimum Financial Investment. L. Non-borrowing Individuals CHFA does not permit non-borrowing spouses or others not obligated to the underlying mortgage loan to take title to the subject property. section 202: property eligibility A. Property Location The Property must be located within the State of Colorado. B. Property Type The Property type must be acceptable to CHFA and must also be acceptable to the applicable insurer or guarantor, or to Fannie Mae or Freddie Mac for conventional Mortgage Loans. Acceptable Property types to CHFA are single-family attached or detached homes; Planned Unit Developments (PUDs), attached or detached; townhomes; condominium units; Modular Homes; and Manufactured Housing on a permanent foundation, for which title has been purged as evidenced by either an Affidavit of Real Property or a Certificate of Permanent Location. All condominium projects must meet insurer/guarantor or Fannie Mae or Freddie Mac guidelines. Required documentation may differ and is dependent on project specifications and review type. Lenders are responsible for determining and providing the necessary documentation to ensure that a project meets all applicable eligibility requirements. For government loans (FHA, VA, and RD) project documentation must include: Evidence of project approval based on the applicable insurer/guarantor guidelines. For conventional loans, project documentation must include, but is not limited to, the following: Condo Project Manager (CPM) Approval or CHFA Form 770, Condo Project Approval Certification 17

22 Current project budgets Appraisal reports; and Evidence of required insurance policies and related documentation. In addition, for all conventional loans, the Participating Lender must review the HOA projected budget and determine that it is adequate and provides for the funding of replacement reserves for capital expenditures and deferred maintenance in an amount that is at least 10 percent of the budget. The Property must contain no more than one (1) living unit. Except for the CHFA Statewide Mortgage Credit Certificate Program, the maximum permissible acreage is the lesser of 50 acres, or the maximum acreage allowed under insurer/guarantor guidelines, or applicable Fannie Mae or Freddie Mac requirements for conventional loans. For the CHFA Statewide Mortgage Credit Certificate Program, the maximum lot size for a singlefamily home may not exceed that amount reasonably necessary to maintain basic livability and may not exceed five (5) acres, with limited exceptions. See Chapter 9 for more information. For Property where the land also has an income-producing component, the incomeproducing component must be incidental to the primary use of the Property as the Borrower s Principal Residence. The income-producing component may not be financed with the First Mortgage Loan. For homes that also have outbuildings, such as barns, chicken coops, sheds, lean-tos, corrals, workshops, or studios (in a separate building), no downward adjustment in the First Mortgage Loan amount is necessary if outbuildings are customary for the area. If outbuildings are not customary for the area, the Participating Lender must reduce the First Mortgage Loan amount by the amount the value of the outbuilding. For homes with wells as a water source, documentation is required to verify that the well is located within the boundaries of the subject property. Homes with cisterns as the only water source are ineligible for any CHFA Mortgage Loan Program. For a Manufactured Home to be an eligible Property, title must be purged (if a title was issued), and the Manufactured Home must be permanently affixed to real property in accordance with Colorado law (C.R.S et. seq). The Colorado Division of Property Taxation website has Manufactured Home forms available. Either an Affidavit of Real Property for a Manufactured Home or a Certificate of Permanent Location for a Manufactured Home, as applicable, must be provided at Loan Purchase if available; or if not yet available, the Participating Lender must provide copies of the documents that are being processed with the local officials. A copy of the recorded Certificate of Permanent Location or Affidavit of Real Property for a Manufactured Home, as applicable, must be provided to CHFA within 60 days after the Closing Date. If the Property is in a Leasehold or Land Trust, or the Property will be subject to a Deed Restriction, or Affordable Housing Covenant, then the Property or project must first be approved by the insurer or guarantor (FHA, RD, or VA), or by Fannie Mae or Freddie Mac, as applicable, for conventional mortgage loans, and written evidence of approval deemed acceptable by CHFA, or CHFA Form 780, Housing Restrictions Approval Certification, must be submitted to CHFA. 18